Strategic Fit

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Date Submitted: 11/26/2012 09:31 AM

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Strategic Fit

Firstly, we need to understand what is strategic fit and to see what it contains of. Strategic fit is the consistency between “Customer expectation” and “Supply Chain performance”. It means that there’s a harmony between “what the supply chain performs” and “what the customer expects”. Strategic Fit is very important for the survival of supply chains in a competitive business environment. A company may fail because of a lack of strategic fit.

To examine the concept of strategic fit, we first need to describe its elements in detail. There are two main elements that constitute strategic fit: first, the customer’s expectation, which is the main building block of the “competitive strategy” of a SC and second, the SC’s performance, which is associated with the “SC strategy” in responding to the established competitive strategy. The customer’s expectation is defined by the target customers that the company intends to serve. A company’s “competitive strategy” is its basic method of satisfying more of the customer’s expectations than its competitors. Indeed, the competitive strategy of a company includes its target customers and their specific needs, such as the product type, orders, information, special services, and so on. Applying the appropriate strategy depends on the targeted market scope (broad or narrow) and the customer’s expectations (lower cost or product differentiation). If the customers are cost-conscious or price-sensitive and the company targets a broad industry market, then cost leadership is the right strategy. In cost leadership, the company sets out to become the lowest cost producer in its industry using solutions like economies of scale, preferential access to raw materials, economical distribution channels, proprietary technology, and so on. If the company targets a broad industry market and the customers expect products with unique characteristics, then the product differentiation strategy will be appropriate. Differentiation...